Trading Technology

12:28 PM
Phil Albinus
Phil Albinus
Commentary
Connect Directly
Twitter
RSS
E-Mail
50%
50%

Inside a Mini Flash Crash

Wall Street is looking to learn from its big, Earth-shaking mistakes but it has plenty to learn from the smaller ones.

While the SEC hashes out the causes of the May 6 Flash Crash, the New York Times takes a close look at a mini flash crash that occurred in the early afternoon of September 27 of this year. This mini flash crash shares many of the same characteristics of the May 6 slide, but without the same repercussions to the market.

The Details: Progress Energy, a 102 year-old utility based in North Carolina, saw its stock price plummet from $44.57 a share down to $4.57 in a matter of seconds. Within five minutes of the free fall, the circuit breakers were activated and the stock stopped selling for five minutes.

Here are some highlights from The NY Times report:

Warning Signs? Robert F. Drennan Jr., the vice president for investor relations at Progress Energy, reviewed the trading records and said he had noticed unusual trading activity leading up to the plunge. While it's a fairly sleepy stock that "may go for several seconds without a trade," the activity increased before the price took a dive. "There was a big ramp-up in the trades, hundreds of trades a second," he said.

A rolling stop: "…the circuit breaker worked on the New York Exchange, but trading happens so fast that before other exchanges could also halt trading, the company's stock price continued to fall on the Nasdaq, all the way down to $4.57."

The panic: Progress Energy received calls from worried investors, including hedge funds: "When the hedge funds call up and start to complain, you know you have a problem," said one Progress Energy official.

More to come? "It's like seeing cracks in a dam," said James J. Angel, professor at the McDonough School of Business at Georgetown University. "One day, I don't know when, there will be another earthquake."

Food for thought.

Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio
Comment  | 
Print  | 
More Insights
More Commentary
The Art of Leveraging Governance, Risk & Compliance Technology Tools
Eliminating compliance risk across information channels is a constantly transforming task. Ongoing auditing and auto-corrective technology can increase trust, accountability, and transparency.
The FSB's Swaps Data Aggregation Report, a Technical Review
The Report discusses legal, technological, and regulatory issues to be resolved in order to obtain a complete view of swap transactions around the world.
Raising the Data Management Stakes
Data management can get firms only so far. Advanced data analytics is needed for all business lines and for calculating risk, especially with BCBS 239 on the horizon.
Asia/Pacific Challenged by T+2 European Settlement Cycle
A survey commissioned by Omgeo shows market participants in Asia/Pacific are ill prepared for Europe's T+2 settlement deadline in October.
The Future of the CIO
Today’s chief information officers are no longer hardcore technologists. And they aren’t pure business leaders either. They need to have excellent business and technology acumen to succeed.
Register for Wall Street & Technology Newsletters
White Papers
Current Issue
Wall Street & Technology - Elite 8, October 2014
The in-depth profiles of this year's Elite 8 honorees focus on leadership, talent recruitment, big data, analytics, mobile, and more.
Video
Exclusive: Inside the GETCO Execution Services Trading Floor
Exclusive: Inside the GETCO Execution Services Trading Floor
Advanced Trading takes you on an exclusive tour of the New York trading floor of GETCO Execution Services, the solutions arm of GETCO.